Vouchers Can Help Families Afford Homes, With Little Impact on Market Rents

Vouchers Can Help Families Afford Homes, With Little Impact on Market Rents

The Housing Choice Voucher program is highly effective at helping people with low incomes afford rent, but it only reaches about 1 in 4 eligible households due to funding limitations. The Build Back Better (BBB) legislation that passed the House would add about 300,000 new vouchers, which is an important step to reduce homelessness, overcrowding, housing instability, and racial disparities in housing opportunities. Some have suggested that providing rental assistance to more families will drive up rents by increasing demand for housing or enabling landlords to overcharge, offsetting a large part of the benefit. Research on previous voucher expansions has found that vouchers have little overall impact on market rents, however, and the voucher program has safeguards that limit the amount landlords can charge.

The additional vouchers provided through BBB would be expected to have only a limited impact on rents overall, for four main reasons:

The Housing Choice Voucher program assists 2.3 million low-income households, usually by helping them to rent units of their choice in the private market. These households — most of them seniors, people with disabilities, and workers earning low wages — pay 30 percent of their income for rent. Vouchers cover the remaining cost, up to a subsidy cap (called a payment standard) based on typical market rents for modest housing in the local area.

Research Shows Rental Markets Have Absorbed Previous Voucher Expansions Without Major Rent Increases

Most Voucher Holders Already Rent Homes but Struggle to Afford the Cost

Some families use their vouchers in their current rental unit. This can greatly reduce the family’s rent burden and ease hardship by enabling them to cover other necessities such as food or medicine and making it less likely that they will be evicted in the future.

Sometimes vouchers do increase the number of units needed, by enabling people who are doubled up or homeless to afford housing — outcomes that have powerful, positive effects on families and especially children. But rental markets have some capacity to absorb new voucher households just as they absorb other new renters, such as young people moving out of their parents’ home. This capacity to absorb new renters could be different during implementation of the BBB voucher expansion compared to earlier expansions due to two offsetting factors: on the one hand, rental markets have tightened during the pandemic and vacancy rates are relatively low today on average nationally, but on the other hand the bill’s expansion would be accompanied by the most ambitious federal effort in decades to increase the supply of housing.

Measures to Expand Housing Supply Would Help Absorb Vouchers, Especially in Tight Markets

BBB also includes a new initiative to ease regulatory barriers to housing development, which play a central role in limiting housing supply in many areas. Most zoning policies and other housing regulations are developed at the local or sometimes state level. The Unlocking Possibilities Program initiative would provide grants to state and local governments to develop and implement plans to ease exclusionary zoning and other policies that limit housing development. The initiative could help encourage those governments to institute policies that make housing more abundant and affordable.

A further factor limiting vouchers’ impact on rents is a set of programmatic safeguards designed to prevent vouchers from paying more than a unit would be worth on the unsubsidized market. This is important, because in theory owners could overcharge for units even if, for the reasons described above, the number of available units is adequate to absorb the new households created by vouchers.

Voucher payment standards, which cap subsidies at levels based on moderate rents in the local market, provide a check against excessive rents. A family using a voucher may rent a unit with a rent above the payment standard, but it must pay 100 percent of the excess rent itself, so it has the same incentive as an unassisted household to avoid paying more than a unit is worth.

Rethinking Federal Housing Policy: How to Make Housing Plentiful and Affordable,